Labor: Managing a down economy—WARN Act and its progeny

The Worker Adjustment and Retraining Notification Act (WARN and its state law equivalents (mini-WARN Acts) protect workers by requiring 60 days’ advance notice of plant closings or mass layoffs. WARN Acts call for potential damages which include up to 60 days’ wages and benefits for each employee of the company, plus daily fines of up to $500. When the economy takes a turn for the worse, the WARN Act and mini-WARN Acts tend to get attention, increasing greater potential that a violation of the WARN Act affects the company in a negative way.

Two events must occur before the notice requirements of WARN and/or mini-WARN Acts arise:

The employer in question must be covered by the law

The particular plant/business closing or mass layoff must meet the trigger requirements specified in the law

Covered Employers. The WARN Act only applies to employers with 100 or more employees. New and low-hour employees are not counted when determining if a business is covered under the WARN Act. A new employee is one who has been employed for fewer than six of the 12 months preceding the date notice is required. A low-hour employee is one who averages fewer than 20 hours per week.

The employee count is calculated on the date when the first notice would have been required , either 60 days before the layoff or plant closing occurs or on the first date of a 90-day aggregation window, if there is more than one involuntary termination in that 90-day period.

Employers must also be aware of mini-WARN Acts that may be applicable to multi-state companies. These mini-WARN Acts often have coverage thresholds lower than the 100 employee requirement under the federal WARN Act.

Plant Closing Trigger. The WARN Act defines a plant closing as a permanent or temporary shutdown of a single site of employment, or of a facility or operating unit at a single site, that results in employment loss for 50 or more full-time employees. An operating unit refers to an organizationally or operationally distinct product, operation or specific work function within a single site of employment. For example, an IT department may be an operating unit. If a covered employer were to terminate all 55 IT employees and outsource that entire function, a plant closing would likely be triggered.

Mass Layoff Trigger. Mass layoff is defined as any workforce reduction that does not result from a plant closing and creates an employment loss affecting either:

50 or more employees and at least 33 percent or more of the employer’s total active workforce at a single site of employment

At least 500 or more employees

If less than 50 employees suffer an employment loss, there is no mass layoff as defined under the WARN Act. There may, however, be a mass layoff under an applicable mini-WARN Act.

If between 50 and 499 employees suffer an employment loss, then a mass layoff may be triggered if the total number of employees who lose their jobs is equal to or greater than 33 percent of the total active workforce at a single site of employment. If less than 33 percent of the active workforce suffers an employment loss, a mass layoff as defined under the WARN Act has not occurred, even if that number is over 50 employees. Once again, if a mini-WARN Act applies, that law may cover layoffs of less than 33 percent of the workforce (e.g. the trigger may be 25 percent of the workforce).

New and low-hour employees are not included in the count toward the trigger numbers for business closings or mass layoffs. While such employees do not count toward the trigger numbers, if advance notice is required, new and low-hour employees must receive the notice in the same manner as full-time employees.

More than any other labor law, the WARN Act and its state equivalents are the most complicated. As such, it is advisable for any human resource manager or inside legal counsel unfamiliar with the law to consult with experienced, outside counsel in managing the details of the law.